Public warning may mean career over

Advisers who have been the subject of regulatory action could have a hard time transitioning to the new regime.

The Financial Markets Authority yesterday warned about Brian Ferguson, who it said had copied and pasted client signatures into insurance policy documents.

He was dobbed in by his dealer group, which also "showed him the door".

It’s not the first time the regulator has made public comment about an adviser, without taking further action.

In 2016, the FMA made public details of a warning it gave to a unnamed financial adviser who advised his clients of an alternative life cover plan with a different insurance provider but did not tell them about the policy pricing. He then provided a direct debit form to the clients, which they ignored.

He completed and submitted the direct debit form on his clients’ behalf, without authority, and completed and submitted a declaration of good health on his clients’ behalf without authority.

Compliance expert Gavin Austin said there could be long-term repercussions for those people in the new regime, even though they had not been penalised any further.

They would be unlikely to be signed off as fit to receive a license to run their own financial advice provider, he said, and would find others unlikely to take them on, too.

Under the current Financial Markets Conduct Act requirements, those applying for a licence must meet “fit and proper” tests. Austin said similar would be expected of advisers.

“I don’t think they would ever be accepted as a nominated representative of any organisation. And I don’t believer they would pass the good conduct test for licensing.”

A spokesman for the Financial Markets Authority said it was not clear cut.

“Any compliance history that a person has is something that is commonly taken into account in licensing decisions, but is not necessarily a disqualifying feature.”

Comments from our readers

On 29 November 2018 at 7:22 am Murray Weatherston said:

At outset let me say I fully appreciate the danger of commenting on matters with very limited.
That aside, prima facie, there is inequality between the sanctions in 2016 case reported and this 2018 event.
In 2016 it seems the adviser completed both a DD (doesn't that need the account holders signature(s) - so there must at least be a suggestion of a crime - forgery), and a declaration of good health on behalf of a client who did not appear to want to take out. The sanction here was an anonymised warning.
In 2018 the adviser didn't get the 2 clients to sign the application forms, but cut and pasted their signatures. Presumably the application form was scanned and submitted electronically - otherwise the insurer surely would have noted the unusual way they were signed. The adviser claims the clients knew. Prima facie, they wanted the cover - of course the adviser was sloppy. But that warrants a public naming and shaming.
All I'm pointing out is the treatment seems to be quite unequal.

On 29 November 2018 at 7:33 am JPHale said:

Agree Murray, though with time approaches do change.

The 2016 example is fraud, plain and simple. The 2018 situation is use of a document, there is a similar practical element of fraud but in a different situation.

Both cases should be out the door with you, as this is failure of integrity at a basic level that raises questions on many other levels.

Because you can doesn't mean you should. The integrity of the adviser file can be the difference to a paid claim or a PI claim.

Any question brings into question the whole file and integrity of the process, and that's something we should be incredibly mindful of.

On 29 November 2018 at 7:53 am Interested AFA said:

100% agree Murray.
I am wondering what ulterior motive Preferred may have had in this matter also. Seems to me that there are always 2 sides to the story - as the Prime Minister might say, 'read between the lines ....'

On 29 November 2018 at 12:54 pm Tash said:

I do not know Ferguson but this disturbs me greatly, as it should all advisers.

The FMA have destroyed a reputation and I for one am not sure there are not significant questions for the FMA to answer. I only know what the FMA put out in their release so don’t know all the facts. However, assuming the ‘cut and paste’ job was agreed to by the client then:

Was Ferguson not the insurers agent under the insurance law amendment act of 1977 ? If so giving Ferguson the authority was the same as giving it directly to the insurer. While the insurer might want to discuss this with Ferguson this is not the FMAs jurisdiction.

If the client agreed, I can’t see how s33 of the FAA applies. The duty of care, diligence and skill is owed to the client. How is this breached if the client makes a specific request?

I also can’t see how s34 applies. S34 applies specifically to financial adviser services ( recommending the acquisition or disposal of a financial product in this case). Ferguson did not perform financial adviser services to the insurer.

The FMA have a duty to apply the law dispassionately, objectively and after proper consideration. Failing this advisers have no direction and chaos and tyranny will prevail.

I think the FMA need to properly justify this drastic action.

Ferguson may not have been wise but what crime is he guilt of actually?

On 29 November 2018 at 3:36 pm Ron Flood said:

Can anyone please explain why he didn't just scan the documents, requiring a signature, and email to the client for signing.

Do the clients live in Timbuktu, with no internet connection?

On 29 November 2018 at 6:06 pm Adviser1 said:

Any lawyers in the house? If a client has given permission for the adviser to sign on their behalf then technically could the adviser then sign their own name and clearly note 'on behalf of the client'?

On 30 November 2018 at 8:23 am MediCare said:

Brian Ferguson is a decent fellow who made a major contribution to Preferred over a long period of time. That organization has now had a change of leadership.

If fraud was involved or the clients interests had been harmed then the FMA would have taken much stronger action than it did.

As a much chastened individual, he should be given a chance to rebuild his career.

On 30 November 2018 at 6:19 pm Patrickdiack said:

Patrick Diack here take it from me, I'm afraid his financial career is over. I have made several attempts to restart my career with little or no success and am still unemployed.

The FMA has powers to cited and destroy advisers, however it has no responsibilities to rehabilitate destroyed careers.

Power without Responsibility.

The road too hell is paved with good intentions.

On 30 November 2018 at 6:42 pm LNF said:

The financial industry is being dictated to by bureaucratic civil servants
So what. was it to anyone's detriment
Grow up
Some decades ago, every Friday afternoon every window had forms up against them with signatures being copied

On 30 November 2018 at 9:09 pm JPHale said:

Sorry Tash, I often agree with your perspective, in this case you're on the wrong side of the law on this one.

Signatures are signatures, not something that can be slapped on anywhere. They represent that individual and when it comes to legal contracts they are sacrosanct.

The comment about signing on behalf with your own signature is the correct approach to an authorised signature, that's not what was required or done here.

From an authority perspective there are two ways this could have been mentioned legally.

An authority document that authorised the adviser to sign (their own name) on behalf of the client, effectively DIMS in our scheme of things

Or

A power of attorney in favour of the adviser, again signing with their own name.

And even then the insurer would question this as they want the authority from the client, given that insurance is a contract of good faith between two parties. Of which the adviser is not one of the two parties.

To sign or copy/paste someone else’s signature is akin to fraud. And I've cancelled agencies in the past for this very activity as it has serious ramifications with insurance contracts.

On 4 December 2018 at 1:07 pm Tash said:

Jp Hale you may be right but you should cite your legal authority but I don’t expect that. You are free to indulge in your own view of law.

I do however think proper authority should be expected from the FMA

On 4 December 2018 at 6:00 pm JPHale said:

Tash, umm... 10 years working with an insurer where this came up on a more regular basis than it should and often had the legal team involved to deal with the issue. Some 25 years dealing with lawyers and the legal system in various capacities, including legal cases where signatures and authorities were hotly debated. So yeah, I've covered this in some depth.

As to expanding on this, you're welcome to look up the law around signatures, it's a function of common law.

The more recent amendments for digital signatures spell this out even more succinctly. And puts the onus on the individual accepting digital signatures to authorise them and their representation.

Which is the nail in the coffin on this one as the clients involved were unaware of the application of their signatures to documents and thus breaks that law too if the digital argument was to be offered as an alternative excuse.

As to the FMA's conduct on this, they have been more than fair, a public warning is their assessment of a suitable punishment for the magnitude of the harm created, which is quite different to the criminal nature of the situation when the law is applied.

If this was progressed to court, as the only judicial option open to the FMA for an RFA on this issue. This would potentially have a number of points of law that have been broken and the adviser concerned is potentially facing up to a $100,000 fine under the FAA, and further proceedings under the various acts which could include a prison term.

I very much suspect, given the lack of actual client harm the FMA action suggests, the FMA sees the public censure as the best course of action that is fair to the adviser but doesn't actually put him out of the industry.

However, the bar the FMA has set with this lower then most insurance companies will tolerate.

I'm comfortable with the level of action from the FMA in this situation, and anyone not understanding or appreciating what was wrong with the advisers' conduct needs to have a close look in the mirror.

The adviser concerned has potentially got off fairly lightly, and in the harsh light of day they may have an impact on their reputation, they still have a business and they still have clients. Which hopefully results in better conduct in the future and sends a message to the industry that this is not tolerated.